Date Company makes calendars. Information on cost per unit is as follows:
Fixed marketing expense totalled $13,000, and fixed administrative expense totalled $35,000. The price per calendar is $10.
$\begin{array}{lr}
\text { Direct materials } & \$ 1.50 \
\text { Direct labour } & 1.20 \
\text { Variable overhead } & 0.90 \
\text { Variable marketing expense } & 0.40
\end{array}$
-Refer to the Figure.What is the break-even point in sales dollars?
A)$21,670
B)$28,000
C)$58,330
D)$80,000

Question

Date Company makes calendars. Information on cost per unit is as follows:
Fixed marketing expense totalled $13,000, and fixed administrative expense totalled $35,000. The price per calendar is $10.
 $\begin{array}{lr}
\text { Direct materials } & \$ 1.50 \
\text { Direct labour } & 1.20 \
\text { Variable overhead } & 0.90 \
\text { Variable marketing expense } & 0.40
\end{array}$
-Refer to the Figure.What is the break-even point in sales dollars?
A)$21,670
B)$28,000
C)$58,330
D)$80,000

Quizplus · Accepted Answer

The break-even point in sales dollars is calculated by dividing the total fixed costs by the contribution margin ratio. Total fixed costs are $13,000 (marketing) + $35,000 (administrative) = $48,000. The contribution margin per unit is $10 (price) - $4 (total variable costs) = $6. The contribution margin ratio is $6 / $10 = 0.6. Therefore, the break-even point in sales dollars is $48,000 / 0.6 = $80,000.

Date Company Makes Calendars -Refer to the Figure